SBI Q1 results may surprise investors. BNP Paribas analyst Santanu Chakrabarti explains why
NEW DELHI: India’s largest lender State Bank of India (SBI) is expected to spring a surprise in the June quarter earnings mainly on account of non-interest income, says Santanu Chakrabarti, BFSI analyst at BNP Paribas India. “The corresponding quarter’s number was depressed by MTM losses as well as relatively lower disbursement velocity (fee driver) vis-à-vis the current one.
With margins likely holding and mid-teens growth, we expect a robust quarter from SBI,” he says. The foreign brokerage firm has a target price of Rs 780 on the PSU bank stock.
In this interview with ETMarkets, Chakrabarti also talks about what investors can expect from banks in Q1, valuations and the impact of the mega merger of HDFC-HDFC Bank. Edited excerpts:Do you think that margins are going to be the biggest stress point for banks in Q1 despite the good news coming from the credit growth side?We expect the blended cost of funds to rise on fixed deposit (FD) repricing as recent higher-cost FDs incrementally form a larger part of NDTL, a phenomenon exacerbated by muted CASA growth.
The bulk of floating-rate asset-side repricing also seems to be behind us — especially true for prime corporate loans, which, for all practical purposes, should automatically reprice to the lower of EBLR and MCLR. Consequently, we expect some moderation in NIMs in 1HFY24, with improvements starting to come in only as rate-cut expectations start getting built into borrowing costs (depends on when clarity/consensus on rate cycle reversal emerges).
As of now, some succor is available on margins from a pick-up in sentiments and therefore disbursement velocity in the relatively high-yield NBFC adjacent risk-on loan segments like CV/CE, micro-SME, rural, etc. These are
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